The United Nations Decade of Action has entered its third year, and the need for new markets and capital flows is visible. The US, European Union, and India are supposed to be the most influential mediators of financial decisions from 2023 till 2050.
India is an emerging market that has various environmental and social challenges to overcome. A new report from the Impact Investors Council (IIC) has impact investment opportunities in India for growth-stage investors.
What Is Impact Investment?
Impact investment is a strategy that aims to generate social or environmental benefits with fiscal returns. These investments earn a market share of return negating the belief that running behind social and environmental causes means losses.
In India, the venture approach is the most common model. This approach encourages investing early on in profit organizations catering to the vulnerable sections of society. But these enterprises did not transform into large-scale platforms as it does not facilitate investment in the growth stage of the business.
According to the World Economic Forum, “The impact investing market in India has grown significantly in recent years. Big ticket deals (more than $10 million) have more than doubled in the past five years or so, with the number of deals in the $20 million or more range has increased by a factor of times 2.3.“
Impact investments are expanding into sectors like agriculture, technology for good, education, livelihoods, and healthcare.
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According to emerging markets, there are 4 prime reasons for the interest of investors in the Indian subcontinent.
Fast-Growing Bottom Half Of The Country’s Economy
India became the country with the highest population in the world, and it has access to young and skilled talent.
The internet penetration and the introduction of 5G technology will help the impact-oriented business to create low-cost offerings to sections of customers that were overlooked earlier.
This phenomenon is also called the next half-billion narrative. This means the massive and rapid growth of the bottom half of the Indian economy.
Innovative Impact-Oriented Business Models
Digital technology in India has expanded. It has allowed tech firms to increase their impact and drive innovation across sectors like the future of work and climate tech.
According to The Print, “The diversification and proliferation of impact-oriented business show the shift from microfinance to technology-driven models such as sustainable mobility and small and medium-sized enterprise (SME) finance (16.7% and 11.2% of total equity impact capital was raised in 2022, respectively).“
Impact Along With Hefty Profits
The Indian markets have many opportunities for social entrepreneurs to create an impact at a higher scale and achieve profits for investors.
An analysis of IIC has shown that equity impact investments in India with a holding period of 5.2 years have provided an internal rate of return of around 30% while changing around 500 million lives across the country.
Maturing Ecosystem Of Impact Investment In India
The Impact Investing Ecosystem is evolving in India. It is supported by stakeholders working to create an enhancing environment for investment in social causes.
This has led to the emergence of ecosystems like IIC, which focuses on increasing the flow of private capital into social impact through research and advocacy.
There are various policies by the Indian government to support impact-oriented businesses. These policies facilitate a growth stage impact investing landscape in India. Some of them include Atal Innovation Mission, the Social Stock exchange, and The Samriddhi Fund.
A conducive environment is available for impact-oriented business models in India. The push from the government and the social entrepreneurs will eventually help this financially feasible and socially impactful business model.
Image Credits: Google Images
Sources: The Print, World Economic Forum, Harvard Business Review
Find the blogger: Katyayani Joshi
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